Competitiveness and the Fourth Industrial Revolution

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The possibilities of the Fourth Industrial Revolution to produce productivity gains and, therefore, greater prosperity for both individuals and communities depend on a number of factors. Ultimately the goal is for individuals, firms, and sectors to be able to access emerging technologies, incorporate them into their innovation and operational processes, and participate meaningfully in both new and transforming value networks.

It is tempting to assume that the competitiveness factors that matter the most for firms and countries looking to benefit from the Fourth Industrial Revolution are linked primarily to measures of technological sophistication and innovation. Indeed, this edition of The Global Competitiveness Report shows that levels of business sophistication and the strength of innovation-related factors are becoming more influential in driving competitiveness, and many of the characteristics of technologies that are driving the Fourth Industrial Revolution (such as their networked nature) suggest that these factors will continue to rise in importance. However, many other factors also influence the ability of an economy to employ and develop emerging technologies. As this chapter outlines, the Forum’s approach to measuring innovation is itself changing, taking an integrated, future-oriented, and ecosystemic approach to the link between productivity and new products and processes, moving away from a linear process of idea creation to commercialization.

A hallmark of the Fourth Industrial Revolution is the way in which it converges with, relies on, and employs digital technologies and business models in order to create, exchange, and distribute value, requiring digital infrastructure and network availability in addition to business sophistication. The innovation ecosystem pillars in the revised Global Competitiveness Index presented in this chapter offer an approach that captures all of these ideas: the Fourth Industrial Revolution does not rely only on ICT technologies but also on non-ICT technologies, as reflected in the revamped technology adoption pillar; the possibility of recouping investments through economies of scale as reflected in the new market size pillar; the business dynamism pillar showing the factors that drive entrepreneurial spirit and ways businesses respond to opportunity; and, finally, the pillar showing innovation capacity going beyond R&D to incorporate the factors that incentivize creativity, idea-generation, and collaboration.

A companion report, the Forum’s GlobalInformation Technology Report 2016, explores some of these aspects: the ways in which network readiness is essential to enabling the creation and use of emerging technologies. The 2016 report reveals that countries looking to capitalize on economic gains of ICTs should promote not just access, but also adoption and use of digital networks.

Adoption—the successful use and development of emerging technologies—of course requires human capital, which is another critical input of the Fourth Industrial Revolution in the form of healthy, educated populations. The new human capital pillars of the GCI, divided into a heath pillar and an education and skills pillar captures these two forms of investment in human capital. In particular, the education and skills pillar looks at both the skills of the current work force and the skills of the future work force. In line with finding from the Forum’s Future of Jobs report, this pillar includes indicators on critical thinking in teaching.

Finally, while the Fourth Industrial Revolution will feature technologies such as the blockchain that can support both private and public governance, these technologies alone will not replace the importance of an enabling environment. The framework presented in this chapter covers three pillars that will be essential for economies looking to capitalize on the Fourth Industrial Revolution: institutions, such as rule of law and smooth functioning of public administration; infrastructure reflecting investment in new measures of connectivity; and a healthy macroeconomic context.

Contributed by Nicholas Davis, Head of Society and Innovation, Member of the Executive Committee, World Economic Forum